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Reed Smith, The Swap Report, CFTC Open Meeting Scheduled…, here. Derivatives regulation.
The proposed agenda covers:
- Minimum Block Sizes for Swaps;
- The ”Made Available to Trade” Rule Under section 2(h)(8) of the Commodity Exchange Act and Swap Transaction Compliance and Implementation Schedule;
- Core Principles for Swap Execution Facilities (SEFs); and
- Anti-disruptive Practices Authority – Interpretive Guidance and Policy Statement.
You can obtain information about participation by clicking here.
Shane Parrish, Farnam Street, The Divine Comedy, here.
Last month poet and critic Clive James released a new translation of The Divine Comedy. Although, in fairness, it’s more of an interpretation than a strict translation. I don’t think the purists would enjoy it, but if you’re not doing a masters thesis on it, I think you’ll love this translation. I know I’m certainly enjoying it.
Deus Ex Macchiato, The missing futures data repository, here.
Congress mandated that swap transactions be reported to a “Swap Data Repository” that regulators can monitor to conduct real-time market surveillance and that the public can access immediately and for free. Nothing comparable exists in the futures market. There is no “Futures Data Repository,” and no real-time public reporting of futures data, which means that the public will no longer have the access to market data that it was supposed to have under Title VII. This also creates a firewall between the markets and regulators, denying them access to the real-time trading data they need to determine whether speculators are manipulating the energy markets.
Stephen LaPorte and Mahmoud Hashemi, Wikipedia Recent Changes Map, here. Wow – we are so not worthy. If the Bloomberg guys hooked this up to the Bloomberg UUID with the right maps… that would be quite a trading tool. I’ll talk to my Bloomberg sales guy on Monday and see if they can hook me up.
Wikipedia Recent Changes Map
Wikipedia is constantly growing, and it is written by people around the world. To illustrate this, we created a map of recent changes onWikipedia, which displays the approximate location of unregistered users and the article that they edit.
Unregistered Wikipedia users
When an unregistered user makes a contribution to Wikipedia, he or she is identified by his or her IP address. These IP addresses are translated to the contributor’s approximate geographic location. A study by Fabian Kaelin in 2011 noted that unregistered users make approximately 20% of the edits on English Wikipedia, so Wikipedia’s stream of recent changes includes many other edits that are not shown on this map.
You may see some users add non-productive or disruptive content to Wikipedia. A survey in 2007 indicated that unregistered users are less likely to make productive edits to the encyclopedia. Do not fear: improper edits can be removed or corrected by other users, including you!
How it works
This map listens to live feeds of Wikipedia revisions, broadcast using wikimon. We built the map using a few nice libraries and services, including d3, DataMaps, and freegeoip.net. This project was inspired by WikipediaVision’s (almost) real-time edit visualization.
The Wikipedia Recent Changes Map is open source and available on github.
If you are interested in visualizing Wikipedia, check out the other data resources that are available.
Tom Lowry, CNBC, Clusterstock, Wall Street Is Shocked: How Much Does Bloomberg Know, here. He was forced to think about it because of the Bloomberg journalist actions and they couldn’t find a suitable Titanic picture to run with all future Bloomberg Terminal stories. How happy are folks switching to Geico? Happier than Henry Blodget reporting on a Bloomberg journalism scandal. Here, I’ll spot you the required BI picture for all future Bloomberg Terminal posts:
“It’s pretty surprising that an organization this big has given that kind of open access to user information,” said Larry Tabb, founder of Tabb Group, a financial markets research and advisory firm. “This is going to be a challenge for Bloomberg. This hole should have been locked down.
“This industry is all about confidentiality,” Tabb continued. “When you give access to information about when a user is logged in and what they are doing with their terminal, that violates a confidence. That could be an issue.” He added he wouldn’t be surprised if subscriber agreements would be reworked to ensure more guarantees against breaches, especially as Wall Street firms have beefed up compliance departments and measures.
Larry Tabb makes it sound like the Goldman folks are now The Regulators trying to write the rules and the Bloomberg guys are The Derivative Traders who find the loopholes. Much has changed on Wall Street in a few short years.
Tracy Alloway, Alphaville, How to snoop on your customers, the Bloomberg way, here.
Here’s a moderately informative activity for a Friday afternoon.
Log on to your Bloomberg terminal. Type UUID <GO>
Unless you’re a Bloomberg employee you should see something like this:
Many Bloomberg employees, up until recently, would have seen something very different.
The UUID is the terminal ID number of Bloomberg subscribers. Once you have the ID you can look up a whole bunch of other things – everything from the last time the user logged on to the service to what functions they are accessing.
For a Bloomberg reporter covering, say, financial services, this was a handy feature!
Until now, of course.
BOOM goes the dynamite.
Julia La Roche, BI, BLOOMBERG SPYING SCANDAL ESCALATES: Reporters Used Terminals To Spy On JPMorgan During ‘London Whale’ Disaster, here. I told you, Data is rough business.
Reporters at Bloomberg News used private information from Bloomberg terminals to spy on employees at Goldman Sachs.
And now it’s clear that Bloomberg reporters used private terminal information to report on at least one other firm, too.
Wall Street firms pay Bloomberg millions of dollars a year to buy Bloomberg terminal accounts for their employees.
Until recently, Bloomberg News reporters with access to these private Bloomberg systems could see when specific Bloomberg clients were logging on and off and various search functions they use.
The Post’s story revealed that reporters at Bloomberg News used this private information to spy on the activity of individual Goldman partners and use the information they discovered in developing Bloomberg news stories.
According to a source at JPMorgan, Bloomberg reporters also secretly used private client information on the terminal while reporting on JPMorgan’s disastrous “London Whale” trade last year.
Read more: http://www.businessinsider.com/bloomberg-news-goldman-2013-5#ixzz2T0gkfKbA
Stonebreaker, Big Data Means At Least Three Different Things…, here.
Complex math operations (machine learning, clustering, trend detection, ….)
—the world of the “quants”
—Mostly specified as linear algebra on array data
A dozen or so common ‘inner loops’
—Matrix multiply
—QR decomposition
—SVD decomposition
—Linear regression
Gelman and Basboll, American Scientist, To Throw Away Data: Plagiarism as a Statistical Crime, here.
Much has been written on the ethics of plagiarism. One aspect that has received less notice is plagiarism’s role in corrupting our ability to learn from data: We propose that plagiarism is a statistical crime. It involves the hiding of important information regarding the source and context of the copied work in its original form. Such information can dramatically alter the statistical inferences made about the work.
In statistics, throwing away data is a no-no. From a classical perspective, inferences are determined by the sampling process: point estimates, confidence intervals and hypothesis tests all require knowledge of (or assumptions about) the probability distribution of the observed data. In a Bayesian analysis, it is necessary to include in the model all variables that are relevant to the data-collection process. In either case, we are generally led to faulty inferences if we are given data from urn A and told they came from urn B.
Andrew Gelman, Statistical Modeling, Causal Inference, and Social Science, Continued Fractions, here. Quite a shout out to Forman.
I then looked up Acton in Wikipedia and was surprised to see he’s still alive. And he wrote a second book (published at the age of 77!). I wonder if it’s any good. It’s sobering to read Numerical Methods That Work: it’s so wonderful and so readable, yet in this modern era there’s really not much reason to read it. Perhaps William Goldman (hey, I checked: he’s still alive too!) or some equivalent could prepare a 50-page “good parts” version that could be still be useful as a basic textbook.
ars technica, Recursion or While Loops: Which is better? here.
The reason why these questions appear so much in interviews, though, is because in order to answer them, you need a thorough understanding of many vital programming concepts—variables, function calls, scope, and of course loops and recursion—and you have to bring the mental flexibility to the table that allows you to approach a problem from two radically different angles, and move between different manifestations of the same concept.
Experience and research suggest that there is a line between people who have the ability to understand variables, pointers, and recursion, and those who don’t. Almost everything else in programming, including frameworks, APIs, programming languages and their edge cases, can be acquired through studying and experience, but if you are unable to develop an intuition for these three core concepts, you are unfit to be a programmer. Translating a simple iterative loop into a recursive version is about the quickest possible way of filtering out the non-programmers—even a rather inexperienced programmer can usually do it in 15 minutes, and it’s a very language-agnostic problem, so the candidate can pick a language of their choice instead of stumbling over idiosyncrasies.
If you get a question like this in an interview, that’s a good sign: it means the prospective employer is looking for people who can program, not people who have memorized a programming tool’s manual.
Cambridge Community Television, Latke vs Hamentaschen: The Great Debate, here.
An annual MIT tradition since 2003 and an occasional tradition before that! Each team of prominent scholars presents an argument in favor of their respective food. Following the debate, votes are cast, ballots are counted, and the champion is crowned. Don’t miss this exciting debate between the fruit-filled cookie known as the hamentasch and the fried potato pancake otherwise known as the latke!
Matt Taibbi, Rolling Stone, Everything is Rigged: The Biggest Price-Fixing Scandal Ever, here. So Treasure Island is in Jersey City, who knew? Never read that much Stevenson in school. Pressure for transparency on printed swap trades is building up.
That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world’s largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world’s largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.
Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It’s about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.
ISDAfix, ISDA, here.
ICAP, i-Swap, here. Hmm a central limit order book.
i-Swap is ICAP’s award-winning electronic trading platform for OTC interest rate derivatives, offering continuous streaming support across Euro and USD Interest Rate Swaps. i-Swap’s automated matching model and implied strategy trading functionality allows ICAP to enhance its electronic liquidity through improving prices by linking liquidity in underlying swaps to liquidity in strategy orders such as spreads, butterflies, and spread-overs.
The i-Swap trading platform for interest rate derivatives enables customers to choose optimal execution methods, either through a broker or directly via the platform. i-Swap’s hybrid model ensures leading liquidity, execution and transparency.
i-Swap is open to banks that are clearing members of a recognised clearing house for interest rate derivatives. Non-clearing member banks have access via ICAP’s brokers.
ICAP launched its award-winning trading platform, i-Swap for Euro IRS, in September 2010 and since then it has experienced increasing use by market participants and seen trading activity grow. Today around a third of all ICAP’s 1 – 30 year Euro IRS trades are executed electronically through the platform.
In February 2013, ICAP launched i-Swap, its electronic interest rate derivative platform in the US for trading of US Dollar (USD) interest rate swaps.
ICAP’s interest rate swaps platform has a number of features that are specifically developed to reflect the trading strategies of the banks:
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Certainty of execution ensured by pre-allocated credit allowing instant matching
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Open Central Limit Order Book (CLOB) – matches all orders according to same priority rules
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Multi-legged, implied matching of strategies and outright swaps with no chain limitation or legging risk
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Single API supporting automated order, credit submission and instant risk updates
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Trade confirmation and STP via Markitwire
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Hybrid Liquidity Pool, combining best of voice and electronic markets for maximum execution flexibility
Leising, Fortado, and Brusden, Bloomberg Businessweek, Meet ISDAfix, the Libor Scandal’s Sequel, here.
The rate, known as ISDAfix, is a benchmark in the $379 trillion market for interest rate swaps, which corporations and governments use to fine-tune their borrowing costs. U.S. regulators have subpoenaed as many as 15 banks and about a dozen current and former brokers at ICAP (IAP), the company that collects the data submitted by banks to set ISDAfix prices, to determine if they’re colluding to manipulate quotes. ICAP said in a statement on April 9 that it had no knowledge of price manipulations by its brokers, and that it is conducting its own inquiry.
The probe, by the U.S. Commodity Futures Trading Commission, echoes last year’s Libor scandal because both involve benchmarks that are handmade. In other words, they’re determined by humans, not by data automatically entered from actual trades, making them susceptible to falsifying for profit. The agency is also investigating possible manipulation in gold and silver indexes, according to the Wall Street Journal. “Given what we have seen in Libor, we’d be foolish to assume that other benchmarks aren’t venues that deserve review,” commission member Bart Chilton said in March. (Bloomberg LP, the parent of Bloomberg Businessweek, has sued the CFTC, seeking to bar the implementation of a regulation related to the clearing of swaps.)
Linette Lopez, BI, The Ugliest Businesses On Wall Street Are Going To Get Uglier, here. Make it Til Tuesday.
European securities firms will bear most of the erosion as a tax on financial
transactions cuts sales and trading volumes, Deutsche Bank analysts including Matt Spick, wrote in a note to clients today. The next “wave” of regulation on over-the- counter derivatives and clearing may spur smaller competitors to exit the businesses, they said.
There is a small silver lining here for NYC, which is that Deutsche goes on to say the blow to European investment banks will likely have clients heading to the other side of the pond.
So there’s that.
Thomas Herndon, BI, Exclusive: The Grad Student Who Took Down Reinhart And Rogoff Explains Why His Paper Refutes Their Main Result, here. She wants to know when your thesis defense is scheduled.
I want to address here what I feel are the major misinterpretations of our work, which will in part require engaging with the claims made in Reinhart’s and Rogoff’s response. First, we categorically did not impute any negative motives to the authors; and second, our results are not consistent with and do not confirm their findings.
I want to start by stating in the strongest possible terms that the purpose of our paper was not to imply that the selective omissions and unconventional weighting were, as R&R asserted in response to us, “intentionally used to bias the results.” The purpose of our paper was strictly to ascertain the veracity of their results. We know nothing whatsoever about their motives, and did not speculate on this at all in our paper. Throughout our paper we assume that their errors were honest mistakes. We also have honest differences over the appropriate methods for calculating average GDP growth figures.
Read more: http://www.businessinsider.com/herndon-responds-to-reinhart-rogoff-2013-4#ixzz2RCMawURk
The Economist, BI, It’s Never Been Harder To Start A Hedge Fund, here.
Sadly for aspiring plutocrats, it is getting ever harder to launch a fund. Swaggering financiers once joked that launching with less than $1 billion of outside money to invest was hardly worth their time. Debuts that splashy are now notable only for their scarcity.
A new fund typically opens with $50m-100m in assets under management.
Even so, and despite buoyant stockmarkets, the number of launches is declining (see chart)
